Japan’s FSA to Enforce Liability Reserves for Crypto Exchanges
- Japan’s Financial Services Agency (FSA) plans to require crypto exchanges to maintain liability reserves by 2026.
- The new rules will end the exemption for storing customer funds in offline cold wallets.
- Exchanges must set aside reserves similar to traditional securities firms, ranging from $12.7 million to $255 million based on trading volume.
- Recent breaches include a $305 million loss at DMM Bitcoin and a $21 million theft from SBI Crypto.
- The FSA is also considering allowing exchanges to purchase insurance as an alternative to holding full cash reserves.
Japan’s move follows significant security breaches, including the Mt. Gox collapse, highlighting the need for stronger protections in the crypto sector. These measures aim to bolster user confidence by ensuring compensation in case of cyberattacks.
Implementing liability reserves could make operating crypto exchanges more costly but may provide a safety net similar to bank account insurance, potentially restoring trust among users and investors in Japan’s cryptocurrency market.
